BIOS

A hydraulic fracturing site in Claysville, Pa. on July 27, 2011. (AP / Keith Srakocic, File)

The Canadian Press
Published Thursday, October 3, 2013 1:38PM EDT

OTTAWA -- Free trade critics say a damage suit being pursued as a result of Quebec's moratorium on fracking is proof Canada needs to be careful in negotiating trade pacts around the world.

The Council of Canadians, the Sierra Club and Quebec-based Eau secours say the suit by Lone Pine Resources Inc. (TSX:LPR) proves that trade deals that include investor protection clauses are a bad idea because they can prevent governments from passing laws to protect the environment.

Lone Pine president Tim Granger says the $250-million suit is to recover expenses and expected returns after Quebec slapped a moratorium on the controversial hydraulic fracturing process for oil and gas exploration underneath the St. Lawrence in 2011.

The moratorium is scheduled to be reviewed next year, but Granger says he has doubts the new Parti Quebecois government will lift it. He says his company would drop the suit if it did.

Council of Canadians trade campaigner Stuart Trew says Quebec was perfectly within its rights to ban fracking under a major waterway, but investor protection clauses in trade deals leave governments vulnerable to having to compensate firms that are affected.

He says Canada can expect more of these law suits if it goes ahead and signs free trade deals with Europe and the Trans-Pacific Partnership.

Another unusual aspect of the case is that Lone Pine is a Calgary-based firm and would not have standing as a foreign entity to sue Canada under NAFTA, but Granger says it can do so because it is registered in Delaware.